What would have happened to the housing market if...

[Anuthanamechange]

1. If furlough wasn’t an option
2. If the mortgage guarantee scheme didn’t exist
3. If there wasn’t a stamp duty holiday (or if they didn’t extend it past the first intervention)

Can’t remember if there have been other interventions, but if everything had been left ‘as was’, where would we be now?

I think there would have been a house price crash on a large scale.

Not sure if one will come about as it so uncertain, but personally feel the rate at which house prices are rising is unsustainable.

As soon as covid hit I thought that house prices would plummet. I couldn’t have been more wrong! But I agree with you that the rises are unsustainable. Where I live in the north the family houses have increased so quickly - they are out of reach for any ‘normal’ person

I thought exactly the same as you! I’m in the north west and houses we were looking at two years ago are now up to £100k more.

Speaking to a friend today who is looking to buy and she said the estate agent had mentioned that the last time it was this busy was right before the crash. It would make me hesitate, but then if you keep waiting it won’t happen, I bet!

Even if all 3 of those hadn't happened I dont think there would have much impact. The people those things affect aren't the ones pushing up prices.

@RunningAlong

The stamp duty holiday has definitely had an effect. Aside from anything else it's lost the taxpayer billions. It's a tax, and the economy is badly in need of tax revenue right now.

Stamp duty holiday contributed massively towards inflating the bubble.

It's been a disaster for FTB and would be upsizers (families who've outgrown their starter homes).

It's also added to the homelessness crisis.

Just in the capital of homelessness alone (London) alone, 165,000 people are homeless.

Homelessness is devastating for the families and individuals affected - and it also costs the taxpayer a lot of money. Money that there might have been more of if we'd had the tax income from stamp duty...

I'm not sure about furlough, but I think the stamp duty holiday is given more credit/slack than is fair for the impact on the housing market. There was a lot of pent up demand from the Brexit vote in 2016, Covid made a lot of people re-evaluate their homes, the stamp duty holiday no doubt encouraged a few more and created some confidence but the market wouldn't have crashed without it I don't think, just as I don't think it'll crash now. Prices have far surpassed the stamp duty savings, if the stamp duty saving was central to a moving decision i doubt people would have paid the prices they've been paying.

65% of homes are owned and more than half are owned outright, without a mortgage. That's a lot of voters that will be disillusioned if there was a correction hence the government won't allow one.
Interest rates are also suppressed downwards even though prices (food, materials etc) have increased but for some reason these rises aren't reflected in the inflation figures. Funny that...

Brexit has also completed (with reduced uncertainty) and we have a large cohort of middle class new immigrants coming from Hong Kong. Those drivers are independent of covid and support measures. The low interest environment also drives investors to seek higher return and safe haven stores of value - housing investment can increase in times of crisis due to capital flight to safety.

The stamp duty holiday has definitely had an effect. Aside from anything else it's lost the taxpayer billions.

I agree. That stamp duty holiday was a huge mistake.

A crash would be a disaster; many "cheap" homes would be snapped up by BTL landlords or cash landlords, leaving even less stock for those looking to buy.

I really don’t think there will be a crash. I’m no expert, but I’ve done a lot of reading from economists and the like, and most seem to think that prices will just level out for a year or two until they catch up with where they’d have been.

No stamp duty holiday would have dented demand, for sure. No furlough might have led to more mortgage defaults. But I don’t think the government would ever have allowed a major crash.

And I don’t think a crash would help as many people as is generally thought. Investors would go mad buying things up, and mortgage availability would likely be massively tightened up, because the banks have hopefully learned from last time.., unless you’re sitting on enough money to buy outright, or with a very good LTV, it won’t help much.

But there will always be people who are predicting a crash; and it’s always possible that it’ll happen at some point.

It won't happen of course, but if a government really wanted to they could change laws in the event of a crash. Ban investors from buying. The obvious solution would in fact be that the government buys the homes. There's an extreme and acute shortage of social housing.

It wouldn't have been a crash anyway. It simply would've stagnated. Which is fine. For the majority of the public who just need a stable home.

45% - so getting on for half of the population, don't own. A lot of voters.

And inflated prices don't help most owner occupiers. Their house might be worth loads but they need to live in it (so it's not available cash). And when they want or need to move, i.e. upsizing after outgrowing their home, they can't... because the prices have gone up too high on the next rung of the ladder.

Voters are taxpayers. Housing growing numbers of homeless families and vulnerable individuals costs billions (it's a shame we lost over a billion in stamp duty tax revenue, given these rising costs).

@FlyingBattie

A crash would be a disaster; many "cheap" homes would be snapped up by BTL landlords or cash landlords, leaving even less stock for those looking to buy.

There wouldn't have been a crash.

It would have been a stagnation. Which is fine, and better for individuals and society than a unsustainable over-inflated bubble.

Sorry 35%, not 45%.

That's still a significant number.

Without furlough there would have been massive redundancies and unemployment. And, yes, a lot of mortgage repossessions. It would have dragged the whole economy down. With businesses having to rehire the bounce back would be impaired.

@safariboot

Without furlough there would have been massive redundancies and unemployment. And, yes, a lot of mortgage repossessions. It would have dragged the whole economy down. With businesses having to rehire the bounce back would be impaired.

Perhaps we ought to have a proper safety net. Lots of Long Covid sufferers might need to turn to welfare benefits over the coming months (and possibly years). Furlough was basically a narrative that people who got sick or made redundant pre Covid didn't deserve support. They too have mortgage or rent to pay.

Aside from anything else it's lost the taxpayer billions

I doubt that is the net effect.

Thousands of people moved (who might not have done so otherwise) , and the bottom of the chain feeds the top, so enabling many purchases that were above the holiday threshold and invoke the highest levels of tax on huge sums.

Also the busy property market kept thousands of businesses in business: EAs, solicitors, surveyors (regular, damp, structural etc), removals companies, tradespeople. Businesses that pay tax, for services that earn VAT for the Gvt.

All these individuals were kept from claiming furlough. All paid tax on their earnings.

I paid more than 6 months of my salary to EAs, solicitors, surveyors, cleaning and small
Jobs people, removal co, and an extra 20% to the Gvt. And all
Those people paid tax on what I paid them.

The SDLT holiday for the middle of the market (FTB and high cost homes not affected) was a ‘lost leader’ in supermarket terms. The property market is worth billions to the Gvt with or without SDLT.

@Anuthanamechange

1. If furlough wasn’t an option

1. If the mortgage guarantee scheme didn’t exist
2. If there wasn’t a stamp duty holiday (or if they didn’t extend it past the first intervention)

Can’t remember if there have been other interventions, but if everything had been left ‘as was’, where would we be now?

I think there would have been a house price crash on a large scale.

Not sure if one will come about as it so uncertain, but personally feel the rate at which house prices are rising is unsustainable.

The people who were furloughed were not buying property. When I applied for a mortgage no lender was considering furloughed income valid for a new mortgage.

Again the mortgage scheme doesn’t apply.

The stamp duty holiday, if you read the facts, just brought forward demand by forcing ppl who might have waited a year to consider buying then.

The biggest driver for people buying during Lockdown was Lockdown itself (ppl needing bigger homes) and the newfound ability for wealthy commuters (who worked from home rather than were furloughed) to out of town living.

There would never have been a house crash as we are an island and the types of people who get mortgages easily were never furloughed.

The only people I know who were furloughed were people like my son working for minimum wage in a shop. No one looking to buy a house at any rate.
I agree with @Ozanj. I am buying in sw Lindon, and while proces have moved up, not hugely. Prices where I'm moving from have - a seaside holiday area. I think the pandemic made people with the wealth to buy a second home or move without worrying about commuting decided to finally take the plunge. Some people decided to cash in too. But neither of these were much affected by stamp duty or other schemes, because they didn't need them in the first place.
Of course this is just a certain sector of the market I'm familiar with. The incentives may have helped the lower end more.

I think you’re missing the point @Ozanj. With no furlough a lot of existing home owners would have been unable to pay their mortgages, leading to repossession and forced sale. Because all lenders care about is recouping the debt, the market would in all probability have crashed.

@Blossomtoes

I think you’re missing the point *@Ozanj*. With no furlough a lot of existing home owners would have been unable to pay their mortgages, leading to repossession and forced sale. Because all lenders care about is recouping the debt, the market would in all probability have crashed.

Actually no, the FCA already forces lenders to jump through lots of hoops before theh can repossess. I think MN has a lot of people who clearly haven’t gone through financial difficulty while owning their own home - repossessions are always a lender’s last resort because the MCOB process required by the FCA is so lengthy they end up losing more money than most properties are worth. Particularly as those who do get homes repossessed are more likely to trash them (set fire to them, cement through pipes etc) which is why repo properties tend to be sold at vast discounts at auction.

Link to the process

england.shelter.org.uk/housing_advice/repossession/repossession_rules_mortgage_lenders_must_follow

I volunteer at CAB and it usually takes lenders 2+ years or more just to get to the court action stage, and even then many lenders, for every payment clients make, prefer to restart their internal processes leading up to it.

That list of hoops has more holes than the average colander, it’s full of mays and ifs.

[quote Tealightsandd]@RunningAlong

The stamp duty holiday has definitely had an effect. Aside from anything else it's lost the taxpayer billions. It's a tax, and the economy is badly in need of tax revenue right now.

Stamp duty holiday contributed massively towards inflating the bubble.

It's been a disaster for FTB and would be upsizers (families who've outgrown their starter homes).

It's also added to the homelessness crisis.

Just in the capital of homelessness alone (London) alone, 165,000 people are homeless.

Homelessness is devastating for the families and individuals affected - and it also costs the taxpayer a lot of money. Money that there might have been more of if we'd had the tax income from stamp duty...[/quote]

I'm not convinced that the effect of the stamp holiday duty is as big as you imagine. I bought my house after the first lockdown and before the stamp duty holiday, and the market was already crazy then with multiple buyers outbidding each other on every house I looked at. Also, this isn't just a UK phenomenon. Prices have also been shooting up in the USA, Canada, Australia, and a number of European countries. People's priories have changed.

High house prices and low interest rates are the only things keeping the Tory Party in power and they will do everything they can to ensure it stays that way.

I don't think that they will crash. I have never thought that, even at the start of covid, which is why I was willing to take the risk of buying straight after the first lockdown.

Saying that house prices are unaffordable is contrary to the fact that there are multiple buyers chasing every house. There are clearly plenty of people who can afford them.

The only thing that might cause a dip is if interest rates go up, but I think it will be a while before we see any significant increases. Also, this would only benefit cash buyers, not anyone needing a mortgage.

Prices of flats in London, the option available to most FTB, did not go crazy. The market was flooded with one and two bed flats.

It was (is) family houses that went up.